There is a growing hysteria surrounding the government's Help to Buy scheme. It could single-handedly push prices to such giddy heights that a crash is inevitable, according to some economists.

When George Osborne outlined his plan to insure the deposits of thousands of homebuyers on newly built properties it was seen as a reckless move that would suck the state into becoming a prop for house prices far into the future.

A plan to extend the scheme to any property valued up to £600,000, currently being discussed in Downing Street, is considered worse than reckless.

Critics worry it will push prices higher, adding to the need for bigger mortgages and deposits.

A study by the Chartered Institute of Housing (CIH) found the first year of home ownership cost on average £70,538 in 2012 after it added together the cost of a 25% deposit, stamp duty, mortgage repayments and annual maintenance. This scary total was 73% higher than the £40,892 homebuyers paid in 2002.

Critics argue that an increase in house prices in a period of flat wages is unsustainable. Without a rise in average wages, higher house prices will lead to a crash.

If that doesn't happen, it will only be because the government keeps pumping money into the market beyond the allotted three years for fear of triggering a house price collapse.

However, as the UK climbs out of a four-year depression, a modest effort by the Treasury to boost prices will hardly bring Armageddon.

House prices are still about 15% below their peak and at the current rate of growth will take at least another couple of years to claim new highs. Transactions are half the peak level of 160,000 a month achieved in 2006 and 2007. Mortgage approval figures show a rise to 37,278 in June, which is a 17-month high, but two thirds of the 1997 level.

Wages are on the up, but only slightly and not enough to start a bidding war. It is also safe to say the housing market is not a homogenous entity. Buyers in London, who are pushing up the average price, are often international investors rather than the cliche of a young couple over-stretching their finances to get on the property ladder.

Then there is the obvious point that ministers can scale back the scheme if the market gets too hot. Already the £12bn of guarantees to lenders – enough, the government believes, to support 190,000 purchases a year – will not be available to buyers with unreliable incomes or poor credit histories, or those buying second homes. It could be tightened further.

It's true interest rates could rise if general inflation spikes, in which case there could be several hundred thousand people struggling to meet their mortgage payments. That's a worry. Yet central banks have made it clear rates will stay low for several more years.

These arguments are offered as a caution against hysteria. The real problem is not that Help to Buy will create another financial crisis, but that it ignores the real problem of limited supply. An investigation of empty homes by the Guardian found there were at least 400,000 that could be brought into use. Renovation is a dirty word in the building industry, which prefers a clear site for new homes, but there are many sub-standard or rundown homes that could be brought back into use.

The CIH says only direct government investment in housing can create the extra homes needed to match a growing population and that must be right. But winning the argument is going to be tough. Statist solutions to the current problems are not welcomed by voters, who blame politicians as much as bankers for the financial crash. Unfortunately mass public housing also has lots of negative connotations and privately built homes tailored to conservative demands (clusters of homes on greenfield sites on the edge of town) are seen as the best vehicle. Yet builders are obsessed with prices and profits and are only drip feeding new homes into the market to maintain the current steady price rises. The government has a stake in high prices after buying two banks (Lloyds and RBS) that have lots of bad loans on their books. Longer term, it's not looking good.